01 Apr Common Refinancing Myths Debunked
After the housing bubble burst and record low interest rates eventually surged a few years ago, refinancing a mortgage has become a popular move among homeowners. With the potential ability to lower monthly payments in prime position, it’s no surprise more people have begun to take advantage.
We offer many refinance options at City Creek Mortgage, but we also caution our clients to be careful and consider all their options. There are situations where a refinance might not be the right call, or when misconceptions within the industry may lead you down the wrong road. Let’s look at a few of these misconceptions to help you avoid them in the future.
The housing crisis helped create this particular myth – it’s true that many lenders prefer at least 20 percent equity be held in the home before a refinance, but it’s not a requirement. Many types of FHA or VA loans will offer refinances to people below that threshold, and the HARP program is designed specifically for people with little or no equity.
Many people naturally think their bank will offer the best rate for a refinance, but this isn’t always the case. Lenders won’t give special rates just because you belong to them. This is why using a strong mortgage broker can be successful – it can help compare several loans and find the best rates from a larger selection of lenders.
Cash on Hand
Another common myth is that you need extra cash on hand for a refinance. While it’s true that refinancing comes with closing costs and other fees, there are plenty of situations where these can simply be rolled into your loan. This trade-off may come with a higher rate, but our brokers can help you figure out if it’s worth it for you.
Housing Costs Reduction
Finally, there’s a common assumption that a refinance situation will lower housing costs over the life of the loan. While a refinance does offer short term benefits, these will almost always be paid in some format over time. This is great for many people who may need a bit longer a term (with smaller payments), but know that it could cost in the long run.
Want to learn more about mortgage refinancing or any of our other mortgage services? The brokers at City Creek Mortgage are awaiting your call.